Recordation Tax Changes in Montgomery County: What You Need to Know

Introduction

Montgomery County has recently passed a new bill, Bill 17-23, which brings about significant changes to the recordation tax rates. These changes, which go into effect on October 1, 2023, primarily affect the premium rate tiers for properties with consideration greater than $500,000. In this blog post, we will delve into the details of these changes, the amount of exception for a personal residence, and the potential benefits of buying or selling a property before these changes take effect.

A Closer Look at Bill 17-23

Under Bill 17-23, recordation tax rates have been restructured to include four premium rate tiers, instead of the previous single premium rate. Here’s a summary of the changes:

Base Rate (All Amounts): $2.08 per $500 (No Change)
School Increment Rate (All Amounts): $2.37 per $500 (No Change)
Premium 1 Rate ($500,000 to $600,000): $2.30 per $500 (No Change)
Premium 2 Rate ($600,000.01 to $750,000): $2.30 per $500 increased to $5.75 per $500
Premium 3 Rate ($750,000.01 to $1,000,000): $2.30 per $500 increased to $6.33 per $500
Premium 4 Rate ($1,000,000.01 and over): $2.30 per $500 increased to $6.90 per $500

Exception for Personal Residences

For those purchasing a property as their primary residence, there is a partial exemption from the recordation tax. Under the current rules, the first $100,000 of the property’s consideration is exempt from the county’s portion of the recordation tax. *This can result in substantial savings for homebuyers.

Benefits of Buying or Selling Before October 1, 2023

With the changes in recordation tax rates looming, there are several benefits to finalizing property transactions before October 1, 2023:

Cost Savings: For properties valued over $600,000, the new tax rates are significantly higher. By completing transactions before the changes take effect, buyers and sellers can avoid the increased rates, saving money.
Simpler Calculations: The new tiered structure adds complexity to the tax calculation process. Closing before October 1 allows for a more straightforward understanding of the taxes owed.
Increased Buying Power: For buyers, the savings in recordation taxes before the change can translate to increased buying power, possibly allowing for a higher budget or additional funds for renovations or furnishings.

Conclusion

The upcoming changes to the recordation tax rates in Montgomery County are important for both buyers and sellers to consider. By understanding these changes and considering the potential benefits of completing transactions before October 1, 2023, individuals can make informed decisions regarding their property investments.

If you have any questions or need further assistance with your real estate needs, feel free to reach out to The Feldman Group.

*This blog post is for informational purposes only and should not be considered as legal or financial advice. Consult a tax professional for personalized advice.

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